Crown Castle, Westland float talk; J. Crew breaks; Secondary levels drop off as heaviness persists

By Sara Rosenberg

New York, May 15 - Crown Castle Operating Co. and Westland Holdings came out with opening price talk on their proposed term loan debt as both deals are getting ready for Tuesday bank meetings that will officially kick off syndication on the transactions.

Meanwhile, in the secondary, J. Crew Operating Corp.'s term loan freed for trading with levels seen in the low-par context. Also, last week's general market heaviness continued into Monday's session resulting in lower levels on most names, including Burlington Coat Factory Warehouse Corp., The Sports Authority Inc., Dole Food Co. Inc., MGM Mirage and Movie Gallery Inc.

Price talk on Crown Castle's $1 billion eight-year term loan surfaced late in the day Monday as the deal is gearing up for the start of its general syndication process, according to a market source.

The term loan is going to be launched Tuesday with opening talk set at Libor plus 200 to 225 basis points, the source said.

Crown Castle's $1.25 billion senior secured credit facility (B1/BB) also contains a $250 million 364-day revolver.

Morgan Stanley and RBS Securities are joint lead arrangers on the deal, with Morgan Stanley the left lead.

Proceeds will be used to refinance existing bank debt and fund the acquisition of Mountain Union Telecom LLC.

Under the acquisition agreement, Crown Castle will acquire more than 98% of the outstanding equity interest of Mountain Union for about $304 million at the closing date and, starting in 2007, will have a right to call the remaining equity interest for about $5 million.

The revolver is expected to be undrawn at closing.

The transaction is expected to close on or about July 1.

Crown Castle is a Houston-based owner, operator and manager of wireless communications sites. Mountain Union is an Alexandria, Va.-based owner, operator and manager of wireless communications sites.

Westland talk surfaces

Also emerging during market hours was price talk on Westland Holdings' $225 million of new term loan debt as the syndicate is getting ready to present the deal to lenders on Tuesday, according to an informed source.

The $175 million 51/2-year first-lien term loan will be launched with opening price talk of Libor plus 325 basis points and the $50 million 61/2-year second-lien term loan will be launched with opening price talk of Libor plus 700 basis points, the source said.

Expected ratings are B1 on the first-lien term loan and B2 on the second-lien term loan.

The second-lien loan contains call protection of 103 in year one, 102 in year two and 101 in year three.

Credit Suisse is the lead bank on the deal.

Proceeds will be used to help fund Rhodes Homes' acquisition of Westland - a company that owns 55,000 acres in New Mexico - for $266.23 per share and to fund property development. The land is fully entitled for 15,000-plus residential units.

As part of the acquisition financing, Rhodes Homes has committed to provide $75 million of equity.

J. Crew frees to trade

Switching to the secondary, J. Crew's $285 million senior secured term loan (B2/B) broke for trading on Monday, with levels quoted consistently in the par 1/8 bid, par 3/8 offered context from the open until the close, according to a trader.

The term loan is priced with an interest rate of Libor plus 225 basis points. During syndication, pricing was reverse flexed from original talk at launch of Libor plus 250 basis points.

Pricing on the loan can step down to either Libor plus 200 basis points if ratings on the loan improve to B1/B+ or Libor plus 175 basis points if ratings on the loan improve to three-B's or better. The company only qualifies for the step down if leverage falls below 31/4x. Also, once the leverage test is met and the deal gets re-rated, pricing can only drop to the appropriate spread that one time. So, for example, if the term loan receives ratings of B1/B+, pricing will drop to Libor plus 200 basis points and at that time, the pricing grid will be removed from the credit agreement, eradicating the ability to further drop to Libor plus 175 basis points if ratings improve a second time.

Originally, the pricing grid was three-tiered, allowing the spread to drop to Libor plus 225 basis points on B1/B+ ratings, Libor plus 200 basis points on three-B's and Libor plus 175 basis points on four-B's - but this too was changed during syndication.

Goldman Sachs, Bear Stearns and Wachovia are the lead banks on the deal, with Goldman the left lead.

Proceeds from the new loan will be used to repay or redeem the company's 9¾% senior subordinated notes due 2014.

J. Crew is a New York-based apparel and accessories retailer.

Secondary softness progresses

The secondary loan market in general was noticeably heavier and somewhat illiquid on Monday, pushing names in general down by at least an eighth of a point, including Burlington, Sports Authority, Dole, MGM Mirage and Movie Gallery, according to traders.

"The market was down an eighth to a quarter today. And, over the past week it's down three eighths to a half. I would think that eventually people will see it as a good buying opportunity and then we'll see what happens," one trader said.

Burlington Coat Factory, a Burlington, N.J., retailer of branded apparel, saw its term loan B quoted at 99 1/8 bid, 99½ offered, down on the bid side from Friday's closing levels of 99¼ bid, 99½ offered, the trader continued.

Sports Authority, an Englewood, Colo., full-line sporting goods retailer, saw its term loan B weaker by an eighth on the bid side as well, with levels dropping to 99¾ bid, par 1/8 offered from Friday's closing levels of 99 7/8 bid, par 1/8 offered, the trader said.

Meanwhile, Dole, a Westlake Village, Calif., producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers, experienced a slightly larger fall in bids for its term loan B as levels dropped off to 99 7/8 bid, par 3/8 offered from Friday's closing levels of par 1/8 bid, par 3/8 offered, the trader remarked.

And, the general softening that afflicted these relatively new issue, low coupon deals, also affected on the run names like Las Vegas-based casino and resort company MGM Mirage, who saw its bank debt drop to 99 7/8 bid, par 1/8 offered from par bid on Friday, the trader added.

In addition, Movie Gallery's term loan B felt the brunt of the general market pressure as well, with levels on the paper falling to 96¾ bid, 97½ offered from Friday's levels of 97 bid, 98 offered, a second trader said.

However, in the Movie Gallery case, market heaviness was not seen as the only reason behind the weakening - profit taking was named as a cause as well, as some investors decided to sell off positions and take advantage of the fairly significant run up that the Dothan, Ala.-based movie rental company's paper experienced last week after positive first quarter numbers were released, the second trader added.

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